House Passes Patent-Reform Legislation

Last week, the US House of Representatives approved legislation to revamp the current US patent system. Although the law brought cheers from the tech industry, pharma companies fear that their control of drug patents might be cut short.

Changes are as follows:

Patents will be given to companies that are first to file rather than first to invent

Damages caused by patent violations will be gauged based on the importance of the component in question

A post-patent review process will be enacted to hear challenges to patents

The biggest change affecting the pharma industry is a modification to the amount of damages that could be recovered in patent litigation. The damages will be limited, which means the amount of recovery will also be limited. "The most valuable patents, by far, belong to the pharmaceutical industry and the patents that cover blockbuster drugs," said Jay Sandvos, partner at Bromberg & Sunstein law firm. "The new legislation alters the amount of restitution pharma companies can recoup from patent litigation—and it might encourage more infringement and vigorous competition."

Under the current patent system, pharma companies can control the license to manufacturer a blockbuster drug for up to 20 years. The patent is the legal barrier that prevents competition so that the company that invented the drug has an initial monopoly to make money from the drug. Drug companies can also file for add-on patents, further lengthening their control over a drug.

"If the patent laws change, it's going to be harder for companies to extend the life of patent, and the new laws make it much easier to challenge a patent," Sandvos said. "In pharmas' eyes, the current patent system works really well, and changes to the system threaten their success in the marketplace."

The legislation, titled the Patent Reform Act of 2007, is currently in the hands of the Senate. If it's approved, the president has final veto on the bill. "I thought that this legislation didn't have a chance until after the presidential election, but it has already made it through the House," Sandvos said. "My guess is that it is going to be harder for it to emerge from the Senate. And I've heard that the president will veto the legislation, so it seems unlikely that it will culminate in big changes. But only time will tell the tale."